ABSTRACT: The Round Table, chaired by Russell Pittman of the US Department of
Justice, reviewed trends in horizontal and vertical integration in
logistics businesses, maritime shipping, ports and rail freight
transport and examined the circumstances in which integration might
reduce the efficiency of the transport system. There are likely to be
net benefits to society from such integration in competitive markets
but if integration eliminates competition, market power might result in
excessive prices, suboptimal investment and lower than optimal levels
of service for the users of transport services. Options for sector
specific regulators and competition authorities to manage the risks of
market abuse were discussed and the adequacy of antitrust law and
competition authorities to take remedial action should businesses
exploit market power were assessed.

ABSTRACT: A new empirical industrial organisation approach is used to measure seller
market power in the French Comté cheese market, characterised by
government-approved supply control. The estimation is performed on quarterly
data at the wholesale stage over the period 1985-2005. Three different
elasticity shifters are included in the demand specification, and the supply
equation accounts for the existence of the European dairy quota policy. The
market power estimate is small and statistically insignificant. Monopoly is
clearly rejected. Results appear to be robust to the choice of functional form
and suggest little effect of the supply control scheme on consumer prices.

ABSTRACT: This report describes issues that must be addressed to restore public
confidence in financial markets and to put incentives in place to
encourage a prudent balance between risk and the search for return in
(broadly-defined) banking.

ABSTRACT: This paper tells the story of the global lysine cartel of 1992-1995 and
the subsequent U.S. federal prosecutions that followed. It focuses on
how estimates of the cartel?s U.S. overcharges varied widely in the
months prior to settlement with most of the smaller members of the
class of plaintiffs and how additional data gathering and improved
analytical techniques later arrived at a more accurate estimate of
injuries to direct buyers. The detection and convictions of the lysine
cartel in 1995-98 was the first criminal victory over an international
cartel by the Antitrust Division of the Department of Justice in more
than 40 years. They signaled a watershed in the anti-cartel campaigns
of governments and private plaintiffs worldwide in the years since.

ABSTRACT: On May 13th the European Commission levied a fine of $1.45 billion on
Intel for violating its competition law rules by offering volume-based
rebates to dealers and to computer manufacturers. The rebates were
deemed to have excluded Intel’s rival, AMD, from the market for
computer chips. Intel is also alleged to have pressured dealers and
manufacturers to set limits on the quantity of AMD chips that they
would purchase.

The
case raises troubling issues when compared to American antitrust law,
with respect to procedure and with respect to its impact on the
competitive incentives of large firms.

There are questions of
interpretation and evidence here, as in any other case. Intel disputes
the claims that they set limits on AMD chips and that they acted with
an intention to exclude AMD. From Intel’s perspective, this is just a
case of price competition. The EC has pitched the case as one of
exclusionary dealing involving several anticompetitive strategies.

Questions
of interpretation and evidence are best left to the courts. As a
commentator looking at the case from a distance, I have little
worthwhile to offer on the substance of these issues. However, one
point I think is worth noting is that there is a process for evaluating
questions of evidence and interpretation in the EU that appears to be
quite different from that in the United States.

ABSTRACT: We estimate the effect of internet penetration on retail bank margins
in the euro area. Based on an adapted Baumol [1982] type contestability
model, we argue that the internet has reduced sunk costs and therefore
increased contestability in retail banking. We test this conjecture by
estimating the model using semi-aggregated data for a panel of euro
area countries. We utilise time series and cross-sectional variation in
internet penetration. We find support for an increase in contestability
in deposit markets, and no effect for loan markets. The paper suggests
that for time and savings deposits, the presence of brick and mortar
bank branches may no longer be of first order importance for the
assessment of the competitive structure of the market.

ABSTRACT: In January 2008 the government released an Exposure Draft Bill and
associated materials relating to the long-promised introduction of
criminal penalties for serious cartel conduct in Australia. These
materials reflect the work of the previous government and are not
endorsed necessarily by the new government. If enacted in the form
released for public comment, the legislation would be the most
significant reform of cartel regulation, if not competition regulation
generally, since the Trade Practices Act 1974 (Cth) was introduced. The
Exposure Draft Bill proposes not only to criminalise certain forms of
collusion (with consequences for immunity policy, investiga-tory
powers, corporate liability, concurrent proceedings, mode of trials and
many other aspects of enforcement) but also to broaden substantially,
and controversially, the scope of the civil prohibitions against
arrangements between competitors. These reforms would involve a major
shift in competition policy and approach to regulatory enforcement and
would have important practical consequences for the Australian business
sector and its advisors, as well as for the agencies charged with
administering the new regime and the judiciary. In addition to their
national impact, the reforms would have international significance
given the recent campaign of regulators world-wide to combat cartel
activity with harsher penalties and greater co-operation between
foreign agencies. The Exposure Draft Bill contains numerous amendments
to the Trade Practices Act. The proposed amend-ments are far-reaching -
they touch on every aspect of the law, policy and practice relating to
cartel regulation in Australia. Many are complex. Several are highly
controversial. Some are surprising because they go far beyond the
proposals foreshadowed by the Report of the Dawson Committee in 2003
and the former Treasurer's Press Release in 2005. Few would dispute the
merits of criminalising serious cartel conduct in principle. However,
the specific means of implementation proposed in the Exposure Draft
Materials raise many questions. This article outlines the key features
of the Exposure Draft Materials and provides a basic explanation of the
proposed amend-ments. It draws attention to the main legal and policy
issues and highlights areas in which changes should be made or further
work needs to be done. Finally, it identifies and makes recommendations
regarding the options for the government and Treasury going forward.
The authors urge the government to tackle at least the most serious
issues identified in their analysis in order to make the new law work.

What remains un-answered for me is whether there are any studies that show the impact of leniency on cartel formation. Email me if I have missed something in the literature.

ABSTRACT: The cornerstone of cartel enforcement in the United States and elsewhere is a
commitment to the lenient prosecution of early confessors. A burgeoning game theoretical
literature is ambiguous regarding the impacts of leniency. I develop
a theoretical model of cartel behavior that provides empirical predictions and
moment conditions, and apply the model to the complete set of indictments and
information reports issued over a 20-year span. Statistical tests are consistent
with the notion that leniency enhances deterrence and detection capabilities.
The results have implications for market efficiency and enforcement efforts
against cartels and other forms of organized crime.

I just watched the preview of The Informant! directed by Steven Soderbergh and starring Matt Damon. The preview looks great. The movie is about ADM informant Mark Whitacre of the famous lysine cartel. Antitrust has finally made it to the big screen (and I don't count the 2001 movie Antitrust starring Ryan Phillippe).

Update 1: The release date is scheduled for 10/9/09 according to IMDB. (HT: Ihan Kim)

ABSTRACT: Although federal judges have resisted giving due effect to standard
antitrust principles in scrutinizing mergers of nonprofit hospitals,
the presence of health insurance makes it especially important to
oppose monopoly in health services markets. U.S.-style health insurance
gives monopolist providers extraordinary pricing freedom, thus
exacerbating monopoly?s usual redistributive effects. Significant
allocative inefficiencies - albeit not the kind generally associated
with monopoly - also result when the monopolist is a nonprofit
hospital. Because it is probably impossible to undo past hospital
mergers creating undue market power, we suggest another remedy: the
application of antitrust rules against "tying" arrangements so that
purchasers can more easily frustrate hospitals' profit-enhancing
practice of overcharging for large bundles of services rather than
separately exploiting each monopoly they possess.

ABSTRACT: Australia is set to become the latest in a growing number of countries
to join the United States' "coalition of the willing" with respect to
the criminalisation of serious cartel conduct. However, there are
emerging questions as to whether criminalisation has sufficient support
amongst key stakeholders in countries outside of the United States so
as to guarantee its effective implementation. This article argues that
for any new criminal regime to be successful in deterring serious
cartel conduct such support, from the regulator, government, business
sector, general public, judiciary and academia, will be vital. It
considers the extent to which cartel criminalistion enjoys the support
of each of these groups currently in Australia and finds that with the
exception of the regulator and the new government, it may be
questionable, at best. The findings reported in the article provide
insight into the impetus for, and process of, the criminalistion
initiative in Australia and have important practical consequences for
the effectiveness of the future regime. Of international concern, they
also suggest the need for caution in assuming the successful
exportation of the American model of anti-cartel law enforcement.

ABSTRACT: The cliche in the electricity sector, the "cheapest power plant is the
one we don't build," seems to neglect the benefits of the energy that
plant would generate. Those overall benefits could be countered by
benefits to consumers if "not building that plant" was the result of
monopsony. A regulator acting as a monopsonist may need to avoid
rationing demand at monopsony prices. Subsidizing energy efficiency to
reduce electricity demand at the margin can solve that problem, if
energy efficiency and electricity use are substitutes. We may not
observe these effects if the regulator can set price as well as
quantity, lacks buyer-side market power, or is legally precluded from
denying generators a reasonable return on capital. Nevertheless, the
possibility of monopsony remains significant in light of the debate as
to whether antitrust enforcement should maximize consumer welfare or
total welfare.

ABSTRACT: Ever since the heyday of the Chicago School, antitrust intervention has
been under attack. One of the stronger counter-arguments is
behavioural. Models predicting the absence of a social problem rely on
the assumption that all agents are prevoyant maximisers of profit. Many
experiments have shown that subjects are more likely to collude.
However, other experimental findings point to behavioural forces
mitigating the social detriment. Subjects collude less if they know
they inflict harm on others. And they cooperate more if the
structurally identical game is framed neutrally. Arguably this setting
does not give them a chance to activate their world knowledge on the
undesirability of collusion. The experiment to be presented puts these
two forces to the direct test: externalities, and normativity. The main
finding is this: only normativity helps. Society cannot dispense of
antitrust intervention.

A very big, possibly game-changing event has occurred in antitrust. Yesterday, on the last regularly scheduled sitting of its October Term 2008, the Supreme Court granted certiorari to review the Seventh Circuit's decision in American Needle, Inc. v. NFL, 538 F.3d 736 (7th Cir. 2008), /cert. granted,/ 77 U.S.L.W. 3326 (U.S. June 29, 2009) (No. 08-661). The court below offered one of the most dramatic rulings yet in the long-running debate whether sports leagues can be Copperweld "single entities," finding the National Football League a single entity--and therefore immune from section 1 liability as a matter of law--even with respect to the member teams' licensing of their own, individually owned trademarks. Were it ever in doubt, American Needle should prove that the sports league question is not a curiosity of interest mostly to specialists in sports law. The decision below, and the current make-up of the Supreme Court that will decide its fate, pose a larger threat to the scope of Section 1 of the Sherman Act than it has faced in many decades.

The decision below was so dramatic because it found single entity status even as to a kind of conduct in which the teams most obviously do or could compete in horizontal price competition: the licensing of their trademarks for the making of sports memorabilia. In late 2000 the teams of the NFL voted collectively to enter into a 10-year exclusive license with Reebok to produce headwear bearing the teams' trademarked logos.

Thus ended what had been a long period of some competition among headwear manufacturers. Prior to 1963 the teams had individually licensed their own IP directly to manufacturers or through agents, and in many cases a team would license more than one manufacturer to make products bearing its mark. In 1963, some of the teams established a California corporation to act as their licensing agent, but even thereafter the agent and sometimes the individual teams continued to license more than one maker to use its marks. Plaintiff American Needle had been a licensee of the various teams' marks and for many years had made headwear bearing their marks in competition with other licensee manufacturers. But shortly after the exclusive Reebok contract took effect American Needle's contract was allowed to expire, as were those of other outstanding Reebok competitors. There is some reason to believe the Reebok contract has had bad effects already: even with no discovery at all as to the question of the exclusive deal's purpose or effect, plaintiff American Needle was able to adduce evidence of substantial and persistent price increases for the products now exclusively made by Reebok.

Still, the Seventh Circuit affirmed an order of summary judgment that found single-entity status after only limited discovery. Judge Kanne wrote for a unanimous panel that in reaching the exclusive license deal, the teams acted together as one entity. Though he marched dutifully through several quotations from Copperweld and a summary of the existing section 1 caselaw on sports leagues, the only actual defenses he offered for the ruling were two. First, he noted that the teams had been collectively licensing their trademarks for a long time (since 1963).

Though he characterized this point as the "most important[]," since Copperweld characterized section 1's concern as the removal of independent economic forces, it actually seems irrelevant. As a few of the parties pointed out in briefing to the Court, that a conspiracy has succeeded for a long time cannot determine its legality. What really seems much more important was Judge Kanne's rejection of the idea that the question should depend to any extent on whether the teams did or *could have* competed with one another. He wrote first that the panel "[was] not convinced that the NFL's single-entity status . . . turns entirely on whether the league's member teams can compete with one another . . . ." Then, with virtually no analysis of whether their ability to compete *could* be relevant to their entity status, he wrote that "with that said, American Needle's assertion that the NFL teams have deprived the market of independent sources of economic power"--seemingly the critical question under Copperweld--"unravels." The brief analysis following that claim boils down more or less exclusively to the panel's view that "the NFL teams share a vital economic interest in collectively promoting NFL football."

Importantly, plaintiffs were afforded no discovery as to whether the NFL teams did or could compete with respect to trademark licenses to headwear manufacturers, and in fact the panel ruled against American Needle on a Rule 56(f) discovery dispute on that point, which was also on appeal.

In other words, a unanimous panel of a federal court of appeals has held the following conduct to be categorically exempt from section 1 liability: a collection of business firms that happened to share an "economic interest in collectively promoting" one product could establish a horizontal conspiracy fixing the price of a different product, with quite different economic characteristics and as to which they have competed even in the recent past. They may also boycotting all but one downstream distributor of that product with the purpose of maximizing its revenue.

Today, the Court granted cert on the following QP:

"Should the National Football League and its member teams be treated as a single entity that is exempt from rule of reason claims under Section 1 of the Sherman Act, which outlaws any "contract, combination ... or conspiracy, in restraint of trade," because they cooperate in joint production of NFL football games, while at the same time they may have competing economic interests, have the ability to control their own economic decisions, and have the ability to compete with each other and the league?"

This all bodes very poorly for the future of section 1. On the current Court there are probably four solid votes for affirmance (judging from opinion authors and voting in the past several years, one could well expect Justices Roberts, Scalia, Thomas and Alito to vote to affirm).

Affirmance therefore calls only for one more vote. Presumably Justice Stevens will vote for reversal, given his frequent dissents in the Court's pro-defendant decisions of the past few decades (including, importantly, in Copperweld, though not in Dagher, from which no one dissented). Justice Ginsburg too seems a likely vote for reversal, as she has joined some Stevens dissents. I suppose one might expectJustice Breyer, the Court's strongest antitrust expert, to oppose a decision so logically flawed and so damaging to antitrust enforcement (though one might also have expected him not to join in Twombly, for the same reasons). But Justice Kennedy seems no friend of private antitrust enforcement, having written for the Court in Leegin and Brooke Group, as well as Iqbal's recent and controversial application of the Twombly rule and the pro-defendant ruling in securities litigation, Stoneridge Investment Partners.

And finally, assuming Judge Sotomayor is confirmed to the Court in time, it is a bit hard to predict how her presence might alter the Court's balance with respect to a case like American Needle. On the one hand, she would replace a Justice whose record in antitrust is often a bit confusing and surely not very friendly to antitrust policy. Justice Souter, after all, wrote Twombly, and accordingly believed that the benefits of private enforcement are very frequently outweighed by its costs, and the strange metaphysical tightrope he walked in California Dental raises more questions than it answers of his view of antitrust.

So would a Justice Sotomayor much change the Court by replacing the antitrust views of Justice Souter? Like much else about her, it is hard to say. The few antitrust opinions she authored while on the Second Circuit, for example, were mostly pro-defendant (e.g., finding a professional football labor dispute to be within the non-statutory labor exemption and ruling against a Robinson-Patman plaintiff, but leaving glimmers of hope for plaintiffs (e.g., reversing 12(b)(6) dismissal for a class of employees against Exxon and a major procedural ruling in credit card litigation, but which didn't reach antitrust merits).

Another critical fact in trying to read these particular tea leaves is that no Justice dissented in Dagher, a much overlooked decision that happens to be absolutely freighted with dark potential and that bears important affinities with the issues presented in American Needle. That all of the Justices failed to see the potential that Dagher would ultimately lead to judicial repeal of section 1 does not bode well for how they will view American Needle.

In short, there are probably four pretty solid votes for affirmance, one more (Kennedy) that seems only marginally less solid for defendants, and either of two (Breyer and Sotomayor) that might also sign on for affirmance.

One of the most interesting aspects of this case is that the Solicitor General, weighing in at the Court's request, opposed cert. The Court made the request just one month after the new President's inauguration, just after the confirmation of his new SG, and just before the new AAG's confirmation vote. That in itself is interesting, as one must wonder exactly why the Court made its request--it only takes four votes, and neither the number of votes nor their identities are made public, but why exactly was the Court interested in the administration's views of this case?

While one presumes the Court merely offered the administration a courtesy as to this area of enforcement policy that might well change fairly drastically, it is tantalizing to speculate whether there were some more cynical motives surrounding this very bad lower court decision with potentially very broad consequences. But in any event, what is really interesting is that the SG's brief was substantively quite weak. The brief begins by stressing that the opinion below is incorrect and could have major, negative consequences, but then works through a handful of quite strained and unpersuasive arguments that the case is not well suited for review under the Court's cert standards. This was so even though the signatories include a handful of the nation's best appellate lawyers and several absolute powerhouses in antitrust. A conclusion one might draw is that though the signatories would like very much to see Judge Kanne's decision reversed, they fear as much as I do that this particular Court will get its hands on it.

In any event, for those of us who would like to see federal antitrust survive the Roberts era without sub silentio judicial repeal, there is one bright spot in these affairs. American Needle's able trial counsel, who developed a strong fact case at the pre-trial stage with only the most limited discovery, has been joined on the Supreme Court appeal by two of Jones Day's best lawyers: Meir Feder, one of the country's most able Supreme Court advocates, and the head of JD's antitrust group, Joe Sims. Mr. Sims, in particular, brings not only world-class antitrust expertise to the table, but an important measure of gravitas--he is not exactly a man the Court will perceive as a leftie firebrand or some reckless pro-plaintiff populist, and rather was a top antitrust enforcement official in the Nixon administration and currently one of the country's leading antitrust practitioners. Their supplemental brief for American Needle in reply to the SG's brief opposing cert is a work of art. One expects that their merits briefs will be devastating.

BOOK ABSTRACT: The European Commission has
acknowledged and respected, in Regulation 1/2003, the ability of the Member
States to apply stricter rules than Article 82. There are some types of conduct
that cannot be addressed by Article 82 because the undertakings involved are not
dominant. One relates to conduct by non-dominant firms against other firms in
weaker bargaining positions. A second type of conduct, and the focus of this
book, relates to the anti-competitive conducts that non-dominant firms may adopt
towards consumers (eg price discrimination, excessive pricing). This book
focuses on instances where non-dominant firms have the ability to behave
independently of customers and competitors and adopt conducts which will induce
consumer harm.

The Commission cannot address
anti-competitive conduct of non-dominant firms which induce significant consumer
harm. This has resulted from the application of the dominance concept and from
the dependence of a finding of a dominant firm on the market share of the firm.
The aim of this book is to illustrate that applying the concept of dominance in
that way means that a non-dominant firm in a differentiated market can adopt
anti-competitive conducts and not be deterred by the possible application of
Article 82.

I will be presenting in DC for a conference hosted by the US Chamber of Commerce on July 7. It is on a topic of growing importance - state owned enterprises. My talks will build off of my forthcoming article "Competition Policy and Corporate Governance of State Owned Enterprises" that will appear in the BYU Law Review.

In its 2008 report Global Trends 2025: A Transformed World, the
National Intelligence Council identified the growing role of the state
in economies around the world as a chief national and economic security
concern. This panel will explore the challenges to America’s national
economic competitiveness from the rise of state-led development models
around the world, including in the United States, that focus on the use
of industrial policy and state interference to discriminate against
foreign competitors and advantage domestic enterprises, whether state
owned or “state influenced". Panelists will provide an overview of the
policies that governments are employing to tilt the playing field in
favor of domestic competitors, and will weigh American’s offensive and
defensive interests in addressing state-initiated distortions to free
market competition around the world.

This panel will explore potential policy solutions
to the SOE challenges and related market distortions discussed in the
previous panel. It will also address the increasing convergence of
trade, investment, and competition/antitrust policies in the global
economic and commercial arena. Discussion will center on the policy
tools that are currently available to U.S. trade and investment
negotiators to address state-centric development models, the
appropriate role of antitrust authorities, and new policy tools that
may be needed in order to address challenges going forward. Speakers
will further provide their assessment of the current approach and
readiness of U.S. government agencies—the Department of Justice, the
Department of Commerce, the USTR, and the Federal Trade Commission—to
tackle these growing challenges in a coordinated fashion and the costs
to America’s competitiveness if they do not.

Panel Discussants:Dr. Paula Stern, The Stern Group, former ITC Chairwoman William Blumenthal, Partner, Clifford Chance D. Daniel Sokol, Professor, University of Florida, Levin College of Law